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Project title

Market study on Polypropylene plastic woven sacks

For

Reliance Industries Limited
(Polymer Division)

Report Submitted By AKSHAY ANAND PARAB

(Student of Vidyalankar Institute of Technology Wadala (East), Mumbai 400 031)

JULY 2009

DECLARATION

This is to declare that the study presented by me to Vidyalankar Institute of Technology, in part competition of the MMS under the title “Reliance Industries Limited. (RIL)” has been accomplished under the guidance of ____________________________.

AKSHAY.A.PARAB

ACKNOWLEDGMENT

I express my sincere thanks to Mr. Rohit Shah and Mr. Ninad Dixit for giving me an opportunity to work for Reliance Industries Limited. I also extend my gratitude to Mr. K.G. Kapse for giving me an opportunity to work in this project. I am also thankful to Mr. Rakesh Pandita, Mr. Amit Mishra, Dr.Manish Desai and Mr.Prabhod Bhatt for their kind cooperation. I am extremely grateful to Mr. Anjan Pyne and Mr. Vasudev Deshpande for sharing their valuable time and helping me throughout the project. I also express my gratitude towards all the respondents whom I visited for data collection. Lastly, I thank all those who helped me directly or indirectly in the successful completion of this project.

Akshay. A. Parab

Table of contents
1) Executive summary 2) Polymers • Polymers Capacities in 2008 India v/s World

3) Polypropylene (PP)   Domestic scenario Installed capacities

4) Polypropylene Market • Market trend in percentage

5) Analysis of Plastic woven sack market • • Raffia: Global consumption Raffia: Domestic consumption A) Raffia: Growth trend in India B) Raffia capacity additions 2008-09 C) Customer satisfaction level

6) Plastic woven sacks and jute woven sacks – A comparison

7) End users consumption of Raffia • Cement sector


Fertilizers sector
Food grains Sector

8) SWOT analysis

9) Michael Porter’s Five Force Model

10) Conclusion and Recommendations

EXECUTIVE SUMMARY
The project talks about the present and potential demand for polypropylene raffia in Cement, Fertilizers and food grain sector. Overall, nearly 430crores plastic woven sacks were used in cement sector, 74crores sacks were used in fertilizer sector and food grain sector showed good growth during 2008-2009. The project views these three sectors and estimates its future demand. Project also studies the raffia sector to know the trends and growth potential in that sector. The traditional sacking application, cement contributes about 37% of total raffia demand of 674KT in 2008-09. Taken into account jute sack shortages and the dilutions by JPMA, it is estimated that there will be massive increase in raffia demand in future. Demand is expected from other diversified sacking and non- sacking applications. The present end sector distribution of sacking use can be summarizes as follows:

Bulk Packaging: Sector wise demand – 674 KT

Polymers 3% Fabrics 7% MF & Ropes 6%

Chemicals 2%

Others 10% Cement 37%

Food grains 11%

Export sacks 9%

FIBC 15%

The various diversified application of raffia tapes and fabrics with an estimated potential of 113,000 tones in 2004-05 is growing at 9% to touch 163,000 tones by 2008-09, which indicates tremendous growth potential n future. This shows there is a massive growth potential in this sector in bulk as well as non-sacking operations. Diversified market potential for 2008-09

sugar 15% tea 6%

Staple food 6%

other 2%

Postal bags 6% tarpulins 20%

fruits & vegetables 14%

paper bailing 13%

Geotextiles 18%

The demand in food grains, fertilizers and exports is expected to go up. Packaging of food grains in plastic woven sacks has gone up by 12% year 2008-09. Thus there is huge growth potential in the food grain sector for raffia industry.

Polymers
Small Share of Global Market The Indian petrochemicals industry is small by international standards, with ethylene capacity in India accounting for only 2.3% of global capacity. Polymers constitute the single largest segment within the Indian petrochemical industry but are rather small in the global context, accounting for only around 2.5% of the global production

Building Blocks & Polymers Capacities in 2008: India v/s World India's (in KT) Building Blocks 11774 Ethylene Propylene Polymers PE PP PVC PS ABS 2816 1999 1975 1990 1002 423 91 5 71303 73596 44668 37606 15525 8616 2.3% 2.7% 2.4% 4.4% 2.6% 2.4% 0.9% India World share

The Indian petrochemical industry has witnessed rapid reduction in import tariff since 1991 which has forced the industry to face increased international competition from countries with feedstock advantage (Middle East) where low price of feedstock, e.g. gas at 0.75$/mmbtu in Saudi Arabia, petrochemical production cost is just a fraction of the same in India which gives manufacturers in those countries significant advantage at the export front. Based on the trends in the end-user sectors, factoring in the various parameters affecting demand for polymers this section tries to arrive at the likely demand scenario in the coming years through 2011-12. The demand scenario projected is based on the following assumptions. • Indian economy would be able to sustain the growth tempo & continue to grow at rates witnessed in the last 3 years or more. • The issues, which are currently hindering industry’s growth would be addressed appropriately to the industry’s satisfaction.

Polypropylene (PP)
PP is the main thermoplastic produced from propylene. It is obtained from polymerization of propylene in the presence of suitable catalysts. PP is crystalline, has high molecular weight, no linear side chains and good directional stability. It has a high strength-to-weight ratio, good process ability and gas barrier properties. With density of 0.89 gm per cc, it is the lightest thermoplastic polymer. PP has high melting point, chemical and heat resistance, good fatigue resistance, low permeability to water and is unaffected by bacteria or fungi.

Polypropylene can be classified depending upon its co- monomer 1) Homopolymers 2) Random Copolymer 3) Impact Copolymer Using common plastic processing techniques like injection moulding, extrusion, compression moulding and thermoforming, PP is converted to Flim, fibres, filaments, injection moulded goods, extruded sheets and pipes. It is used in consumer goods, packaging, home products, automotive parts, industrial products, textile yarns, fibres and fabrics. During 2000-01 to 2006-07, demand for PP increased at a CAGR of 7 per cent. The major PP producers are RIL and HPL. In 2007-08, the installed capacity of PP in India was around 2 million tpa and the marketsize was estimated at Rs.118 billion in 2007-08.

Domestic scenario:In India, the PP market size (demand) was estimated at 1.54 million tones in 2007-08. RIL and HPL are the major producers of PP. PP supply is expected to increase at a CAGR of 13-14 per cent during 200708 to 2012-13, while demand is expected to increase at a CAGR of 10-11 per cent. The surplus is expected to increase in the PP market primarily on account of huge capacity additions by RIL and IOC. Capacity structure RIL is the market leader in this segment with a capital share of 87 per cent, followed by HPL with 13 per cent.

PP: Installed capacities
Initial start-up (tpa) Reliance Industries Reliance Industries Haldia Petrochemicals Reliance Industries Reliance Industries Reliance Industries Reliance Industries Reliance Industries Total Source: Industry, CRISIL Research Location Baroda Nagothane Mednipur Hazira Jamnagar Jamnagar Jamnagar Jamnagar State Gujarat Maharashtra West Bengal Gujarat Gujarat Gujarat Gujarat Gujarat Capacity technology 2007-08 160,000 Montell (Spheripol) 120,000 Montell (Spheripol) 265,000 Technimont (Spheripol) 425,000 Union Carbide (Unipol) 225,000 Union Carbide (Unipol) 225,000 Union Carbide (Unipol) 300,000 Union Carbide (Unipol) 280,000 Union Carbide (Unipol) 2,000,000 date Apr-85 Apr-92 Feb-00 Oct-96 Apr-99 Jun-99 Dec-99 2001-02

The entry barriers in this segment are high as capacity sizes are large and investments of up to Rs. 5 billion are required for a 350,000 tpa PP plant.

Polypropylene Market
Market trend in percentage

BM articles, 2 Co-polymer application (IM), 16 multifilaments, 5 Food packaging, 7 Textile pakaging, multilayer films, 17 Household applications, 20

Woven sacks, tarpulins Household applications Woven sacks, tarpulins, 33 Textile pakaging, multilayer films Food packaging multifilaments Co-polymer application (IM) BM articles

Prices In 2008, average international PP price is expected to remain strong, due to an increase in the prices of propylene and healthy demand. Factors influencing prices:• •

Fluctuations in the crude oil and natural gas prices Economic growth of the major polypropylene consuming countries like USA and China Domestic industrial growth and development Demand for consumption in the international market Government policies and regulation

• • •

PP: Market forecast

CAGR Major (Tonnes) Process applications 200708E
1,275,45 PPHP
Woven sacks. Raffia- fibres Extrusion Tarpulins 465,724 509,036 554,849 607,560 656,165 708,658 8.8

200809F
1,397,39 2

20092010F
1,544,74 8

20102011F
1,714,67 1

20112012F
1,902,72 7

20122013 F
2,116,05 6

(per cent)

1

11

Extrusion

Others household

34,034

38,118

42,883

48,458

54,999

62,424

12.9

Injection moulding IM

applications, furniture , others 313,388 335,012 358,295 382,211 408,679 435,959 6.8

Textile packaging TQPP films Extrusion and multi-layer films 254,035 268,725 293,986 321,396 351,314 383,382 8.6

BOPP films Fibres and filaments

Extrusion

Food packaging

136,000

165,920

204,082

253,061

316,326

395,408

23.8

Extrusion

Ropes,multifilaments

72,270

80,581

90,654

101,985

115,243

130,225

12.5

PPCP
Injection moulding IM Various application

266,038

287,270

313,726

342,063

374,204

410,110

9

243,883

263,786

288,833

315,551

345,704

379,188

9.2

Automobiles

60,196

63,969

70,452

76,791

83,741

91,979

8.8

Luggage

33,997

37,397

41,510

45,661

50,684

55,752

10.4

Furniture Appliances and others

82,606

88,306

94,443

100,748

107,724

114,915

6.8

67,084

74,114

82,427

92,352

103,555

116,542

11.7

blow moulding

BM

Household articles

22,155

23,484

24,893

26,511

28,500

30,922

6.9

1,541,48 TOTAL 9

1,684,66 3

1,858,47 4

2,056,73 4

2,276,93 1

2,526,16 6 10.4

Source: Crisil research E: Estimate, F: Forecast, BM: Blow moulding, IM: Injection Moulding, CAGR: Compounded annual growth rate

Raffia Industry (an overview)

Source: Industry, CRISIL Research

Analysis of Plastic woven sack market Raffia: Global consumption 2008 total consumption – 8.4 MMT PE Bulk Packaging Growth - 6.8 % CAGR over last 5 years PP Bulk Packaging Growth – 8.1 % CAGR over last 5 years

PE 14%

PP 86%

PP Bulk Packaging is about 15 % of total PP consumption PE Bulk Packaging is about 1.6% of total PE consumption
Source: CMAI 2008

Raffia: Domestic consumption:PP Raffia Company share 2008-09. Total consumption about 676 KT

HPL 15%

IMPORTED 9%

RIL 76%

Source: Industry Consumption has increased by 4% to 676 KT from 644 KT A) Raffia: Growth trend in India

Industry sales PP PE Total Growth

2004-05 380 215 595 4

2006-07 439 215 654 10

2006-07 534 234 768 17

2007-08 643 263 906 18

2008-09 676 241 917 1

CAGR 15 0 10

1000 900 800 700 600 500 400 300 200 100 0 2004-05 2006-07 2006-07 2007-08 2008-09 PP PE Total

From the above graph it is clear that there is an inter polymer shift to PP as the sales of shows about 10 per cent CAGR growth. Some of the reasons for this shift are as follows: • • • • Change in market preference. PP has low density among all synthetic polymers. PP has direct softening point and thus a direct support for its use in cement and where there is hot filling of certain products. PP has a higher coefficient of friction and hence higher stack ability during storage.

B) Raffia capacity additions 2008-09 205 KTA capacities added in North-East, West & South.

50 45 40 35 30 25 20 15 10 5 0

43.7 37.7 38.3 36.9

22 9.8 3.2 1.8
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8.9 1.9
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The operating capacity can be defined as the extent to which the manufacturers are utilizing the plants. Mathematically it can be defined as: Operating capacity = Capacity being used for production X 100 Total Installed Capacity The average operating capacity of the manufacturers is about 80-85%. This shows that the producers in order to survive in this sector have to make full utilization of their capacities as their profits depend on the volumes. Therefore it is important for them to select the proper machinery and also maintain it properly, besides this they have to also think about the plant layout that will enable them to utilize the manpower properly, so that they can utilize every single minute as at the end of the day it reflects in the loss of few thousand rupees. Therefore it is not only essential but also imperative that they utilize the machinery to 90% of its capacity to make their unit a profitable one and to write off the plant and machinery cost within 2-3 years period

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Study also revealed that the conversion cost at the factory is coming to around Rs.12/kg whereas from market one gets around Rs.19/kg. Therefore the profitability becomes only Rs.7/kg of material processed. Since, the per unit return on sacks varies between 30-50 paisa, therefore it is imperative to produce volume and hence, within 3-4 years one has to plan a above 80 looms project to become a more profitable and viable unit. It also indicates that uniform flow of raw material has to be maintained as the heating time required for machinery is about 2 hours and each loom stores about 500kg of raw material (work in process). Thus saving of electricity, wastage and overhead cost becomes a key factor for profitable venture. C) Customer satisfaction level The main factors guiding the source of raw material are: • • • Quality Availability Cost

Quality plays a vital role in deciding the choice of raw material supplier. The cost of the raw material is almost same but it is still a major guiding force behind choice of the raw material. Availability forms a major guiding force behind the buying decision as cost and quality being almost same.

Plastic woven sacks and jute woven sacks – A comparison
Sr. No Description Jute Bags PP Bags

1 2

Mass of bag Moisture regain Max oil content on dry deoiled material basis Basic price per bag (excluding sales tax) Cost of packing 1mil.Mt of wheat/rice Packing cost of 20mil.Mts of wheat by FCI Packing cost of 20mil.Mts of rice by FCI Aeration

665gms 22%

135gms Nil

3

3 per cent max by wt. Rs.17.05 (Average of last 5 months & incl. of excise duty) Rs.37.50crs @ Rs.18.75 per bag (ie.Rs17.05+ Rs.1.70)

Nil Rs.10.44(incl. of 16% excise duty & freight)

4

5

Rs.20.88crs @ Rs.10.44 per bag

6

Rs.750.00cr

Rs.417.60cr

7 8

Rs.417.00cr Good Supplies are generally not strictly as per delivery schedule and have been carried over to next months in the past in spite of preinspection by Quality Assurance Wing of DGS&D complaints about poor texture of bags leading to spillage of grains and variations in length /width of bags are there. Besides complaints about damage by water/ rains during transit are also very frequent. 1. Not resistant to water, seepage and contamination 2. Contamination of food grains by jute batching oils 3. Cost of transportation is much higher than of PP bags which are almost 1/5th in weight of jute bags 4.Rough handling may result in burst/tear of bags

9

Problem/Quality complains

10

Other advantages/disadvantages

Good, no mould, cake formation, condensation or musty smell on rice, wheat Raw material available in plenty. No disturbance in supply schedule. The quality checks may be easier to enforce on PP bags and the possibilities of bags getting damage by water/ rain during transit will be lesser. 1. Resistant to water, seepage and contamination is very high 2. No J.B.O. Present and therefore no such possibility of contamination of grains with JBO 3. Cost of transportation are much lesser than the jute bags 4. During trails no burst/tear of bags so far noticed on rough handling of bags.

End users consumption of Raffia

A. Cement sector:-

No. of player – 54 Capacity-215 MMT Large cement plants-136 Mini cement plant-382

Major Players Holcim (ACC &AmbujaAditya Birla Group (Grasim & Ultratech) India Cements Jaypee Group
others 55% ACC 11% Ambuja 9% Grasim 9% Ultratech 9% Jaypee group India Cement 3% 4%

Top 6 players constitute about 45% of the production capacity.

Demand-supply scenario in cement industry projecting comparison between total pp consumed Vs RIL pp consumption

250 627 200 513 462 150 380 326 100 271 380 469 600 505

700 600 500 400 300 200 cement capacity(mn tonnes) cement consumption(mn tonnes) pp consumption( kt) Ril pp consumtion(kt)

50

100 0 2004-05 2005-06 2006-07 2007-08 2008-09

0

Polymer consumption for cement storage rose steadily over the quarter of the last decade due to much obvious increase in the demand of packaged cement. India with a large number of pipeline infrastructure projects has sustained a favorable growth in infra related areas even in times of economic slowdown. The Comparative analysis for the years 07-08 and 08-09 testify the fact that demand for packaged cement and subsequently polymer for its packaging has not receded even in the slowdown. Cement Vendors chose polymer vendors based on Performance Evaluation, Financial Health, MoU status, and technology, Efficiency, Infrastructure and Logistics. Distance from the production Unit also plays a vital Role in selection of polymer bags.

Threats to Polypropylene Consumption

1. Ready-Mix Cement is the looming threat to the demand of packaged cement and polymer consumption (polypropylene) . RMC can be delivered to the construction sites in transit mixers and can be used directly without any further treatment.

a. Unpacked cement consumption increased by 15 % compared to last year for a particular Vendor (ACC Cement).

b. It has already eaten into about 2 % of market share of plastic woven sack(used for storing cement)

c. Advantages of RMC over SMC 1. Assured and uniform quality of required grades 2. Speedy construction through mechanized operations 3. Multi Transportation of raw materials for concrete eliminated. 4. Environmental Friendly. 2. Increase in Freight costs due to increase in fuel and steel prices at about 5 % during 2008-10.

3. Increase in % of unpacked cement including
a. Out of 217 MMT of cement used 12 MT was RMC and 1.5MT

packed in AD star bags.
4. Increased use of paper / AD star bags and Bulk Jumbo Bags.

5. Environmental challenges / Change in law / Emission norms.

6. Lesser availability of Raw Materials for production of polymer bags.

7. Expected fall in cement prices (15-20Rs. per bag) might effect

polypropylene consumption.

Opportunities 1. Growing Cement requirement. a) Northern Region :
Cement Production has been increased by 11%, whereas consumption by 3 % b) Western Region : Cement Production has been reduced by 3%, whereas consumption by 8 % c) Eastern Region Cement Production has been increased by 7%, whereas consumption by 10 % d) Central Region Cement Production has been increased by 3%, whereas consumption by 5 % e) Southern Region: Cement Production has been increased by 7%, whereas consumption has increased by 11%

2. Government norms.

3. Opportunities in rural market.

B. Fertilizers sector: Installed capacity – 184.2lakhs MT/Annum Out of which 124.61lakhs MT is for nitrogen and 59.59lakhs MT is for phosphate. No. of fertilizer plants Large size: 57 Small and medium size: 78 Sector wise Nutrient wise installed capacity of fertilizer manufacturing units is given below.
Manufacturing Sr. No. 1 2 3 units Sector Public sector Cooperative sector Private sector Total Capacity (lakh MT) Nitrogen Phosphate 35.98 4.21 29.41 59.19 124.58 10.3 45.09 59.6 Percentage share Nitrogen Phosphate 28 7.74 23.58 48.42 100 16.02 76.25 100

The standard size of package used is 50kgs; however some of them were also using packages of 25kgs. The factors deciding the choice of the suitable packaging material are: • The hygroscopic nature of fertilizers

• • •

The condition of usage such as dampness etc Prolonged storage of fertilizers due to seasonality Subsidy borne by government of India due to relative cost (applies to Urea)

The type of packaging material used is either jute or HDPE depends mainly on what type of fertilizer the company is producing whether it is composite fertilizer or Urea. If it is urea then 20% of it has to be packed in the jute bags as per government regulation however if it is composite fertilizer then it is packed in HDPE bags. Per bag cost analysis of PE/PP bags as on 1st June 2009.
cost analysis raw material cost/MT cash discount PE 69.4 0.6 68.8 0.082 74.4 2.0 72.4 72.4 0.88 63.7 0.12 3.1 13.0 79.8 0.0 79.8 128.0 10.2 PP 61.3 0.6 60.7 0.082 65.7 3.0 62.7 62.7 0.88 55.2 0.12 3.1 13.0 71.3 1.5 72.8 117.0 8.5

excise duty+ E Cess trade discount

per kg cost Bag costing raw material filler Rs26/kg conversion cost cost/kg U.V. Stabilizer cost cost/kg weight of bag total cost/bag

Note:

To a processor QD & AQD along with MOU discounts are also paid. If we want to calculate exact cost of production then the same also need to be deducted from resin price afterwards. Also we have not assumed price differential of LLD/LD or PP/L/LLD being used for lamination of between the 20-25g. This is virtually very low. While quoting price customer will not pass on the cash discount & TD to processor hence his quote will increase by that amount too.


Also the non availability of raw material these days has resulted in loss of sales (both jute and polymers) It has been found that mainly HDPE bags are used for packing as compared to PP bags as PP bags have low shelf life and the cannot be protected from harmful UV rays and it needs a UV stabilizer which in case of PE bags its not required. Thus it is clear that the fertilizer sector on the whole provides a rich market for plastic woven sacks. However government regulation is acting as an obstacle to fully utilize this area. Apart form these, cost is another factor affecting the choice of packaging material in this sector since a bag of fertilizer approximately cost around Rs.450 as compared to the cost of a cement bag which is around Rs.280.

C. Food grains Sector :-

India is the only country in the world whose nearly 76% of population is directly dependant on Agriculture and related industries. Consequently food grains packaging is a big business which complements the large amount agricultural surplus available. Estimated 80% domestic production of food grains are Rice and Wheat. Therefore, the study focused on these two products. Current domestic food grain and pulses production is 470 million tones and ranked No.2 in food grain production in the world. Rice and wheat contributes 77% of total food grain production. 30-40% food grains is procured and stored by Govt. agencies and rest by private operators. Loss due to poor storage is as high as 5%. Presently there are three bulk packaging options, namely, jute bags, HDPE woven sacks and PP non-woven sack. Retail packs are from 1, 2, 5 and 10kgs. The packaging options are PP non-woven, HDPE woven sack with reverse printed BOPP film laminated and multilayer laminates. Export of 17MMT is carried out either in FIBC or in jute bags for bulk and PET jars for retail sale. It is estimated that 337 MMT of food grains will be produced by 2011-12. Steady decline in jute production is taking place. Therefore, alternate packaging material is required.

Agricultural Products are broadly classified into two main types:1. Food Grains 2. Commercial Crops

Domestic Food Grain Production

2007-08 Food grains Rice Wheat 94.31 72.68

2008-09

Production (million tones) 2007-08 Pulses Tur Gram

2008-09

97.1 77.83

3.15 5.82

2.53 6.23

Jowar Bajra Maize Ragi Milets Barley

7.89 9.78 18.21 2.43 0.61 1.3

7.32 8.63 17.56 1.78 0.39 1.52

Urad Moong Other

1.52 1.52 2.89

0.98 0.49 3.81

Need for Storage of Food Grains: 1. Storage is necessary for uniform supply 2. To preserve them for future use. 3. Storage starts immediately after procurements of food grains. 4. To provide a reserve for contingencies such as droughts, floods, and war. 5. To speculate on high prices either in domestic or in the export market. Procurement and losses while Storage: 1. About 30 to 40 per cent of the grain produced in the country is stored by Government and private agencies. 2. Remaining 60 to 70 per cent is retained by farmers for household use and consumption. 3. The loss of food grains stored by Govt. agencies is less than 1 %. But at the farmers end it can be as high as 5 per cent as a national average.

Food grain Packaging (Maharashtra – FCI) Jute bags are mainly used for packing of food grains in Maharashtra, but the traditional trend of using jute bags for packaging are changing Food grains packed in plastic bags in year 2008-09: 7091 MT in Borivali district (1, 50,000 bags) Food grains packed in plastic bags from Jan 2009- April 2009: 10,000 MT in Borivali district (2, 00,000 bags)

Maharashtra region is divided into 6 district divisions with its storage capacity and monthly requirement given below:
DISTRICT Borivali Panvel Nagpur Manmad Pune Goa STORAGE CAPACITY (metric tones) 1,00,000 80,000-90,000 6,00,000-7,00,000 10,00,000-11,00,000 5,00,000-6,00,000 30,000-40,000 MONTHLY REQUIREMENT (metric tonnes) 20,000 18,000-19,000 1,20,000-1,40,000 2,00,000- 2,40,000 1,00,000-1,20,000 8,000-10,000

Food grains if required are stored for a period of 2-3 years. Main factors that influence packaging in this industry are: • • • • Other factors • • • Better cost economics Easy availability of packaging material Subsidy borne by government Requirement to prevent contamination of packed material. Packaging material must be moisture resistant. Packaging material must be rot resistant. Good shelf life even under exposed and covered storage.

Reasons for not using Plastic bags for packaging till date • • Fumigation of grains is problem because of compact nature of plastic bags Availability of Aluminium Phosphide tablets which is used as insecticides at these districts are nil.

• •

Sliding down and down gradation also becomes a problem. Storage stack which is 18-22bags in height has to be reduced to 13-14 bags in case of plastic bags.

Availability and price of jute bags being major drawbacks, jute bags are slowly but surely replaced by plastic bags. Cost is the main influencing factor for these changing trends (Basic price per bag excluding sales tax Rs.17.05 for jute bags and Rs.10.14 for plastic bags)

Changing trends seen in packaging:During recent times there is also a shift in packaging pattern observed from larger pack to the medium sized packing of 10-25kg pack size of food grains. Plastic woven sack improves printability and eliminates dent formation during stacking, transportation. It reduces the cost compared to packaging types viz. metal container such as tin and others. Multi layer polyethylene bags are much preferred for small and medium size packaging. Polyethylene packaging has show a good demand in this sector There is a bright future of various modes of plastic packaging in food grain sector. Emergence of more and more private players in organized retail sector, the scenario of bulk storage and packaging is changing. Due to growing awareness against adulteration amongst consumers and various types of sales methods adopted by sellers, a revolution in retail food grain packaging is emerging in the country.

SWOT: Raffia industry
Strength • • • Growing industrialization in India, leading to more demand of sophisticated packaging by end customer. The demand is directly related to demand of end product so till time a new better material does not come to replace the position is safe. New big player entering the market.

Weakness • • • • • • • Training required for handling. Reservation of jute packaging in food grains and other sectors which can be a rich market. Manufactures lack commercially viable units. Low resale value. Resale only possible 2-3 times. Stack ability height less than jute. High capacity production required in order to earn profit.

Opportunities • • • • Exports provide a sound market. Poor showing of jute industry. Increasing production of cement, fertilizers etc. Food grain sector can be a huge market.

Threats • • • • • Poor quality of product might affect good export potential International fluctuation in petroleum products affects industry Criticism from certain sector of society as being dangerous to environment Not bio degradable High dependency on labors

Michael Porter’s Five Forces Model

Suppliers
• • • Reliance Industries Limited (76% of the market share) Haldia Petrochemicals (15% of the market share) Import (9% of the market share) • •

Potential Entrants
Indian Oil Corp. Limited Foreign player (raw material)

Polypropylene Industry
• • Fluctuations in the crude oil and natural gas prices Economic growth of the major polypropylene consuming countries like USA and China Demand for consumption in the international market Government policies and regulation

• •

Substitutes Buyer’s views
• Availability, Cost, Quality of the raw material. • • • cement o Ready mix cement o AD start bags Food grains o Multi layered polyethylene bags Fertilizer o Polypropylene bags

Low profit margins due to high over head charges .

Conclusions
• Foreign raw material manufactures are targeting Indian market, so the share of import is expected to increase • Cement serves as an important market in Maharashtra; however Raffia manufactures earn a lot of profit from unorganized sector as well. Substantial portion of sales goes to tarpaulin which is again a seasonal market hence the manufacturers keep looking for new areas for expansion such as paper bailing, defense, geotextiles, etc • • Domestic market is more price sensitive than quality sensitive. Profit margin in this industry is relatively low due to high overhead charges. • Overall, for most of the manufacturers, quality of the raw material does not play an important part. Main factors they consider while choosing the raw material is cost and availability • Future of raffia industry show ample growth and many other varied uses of woven sacks are coming up which shows the industry is going to flourish in future. Also since it is packaging industry demand is a derived demand therefore its demand will always remain until a new better packaging material is found. • Food grain sector shows ample scope in future as government is relaxing the jute packaging orders.

There is lot of scope in exports for this industry that should be properly utilized by maintaining the quality

• •

Domestic market also offers a lot of opportunity from unorganized sectors. Exports can be of a much more importance than they have now, as it is a labour centric industry, which provides an edge to India.

One of the major problems concerning this industry is the quality of manpower, which is generally of lower profile mainly illiterate labour force abounds these factories.

Demand for raffia grade for woven sack applications is expected to grow at a CAGR of 9.2 per cent to over 721.842 tones.

HDPE is preferred for packaging of fertilizers, due to its moisture resistance property.

Growth in demand from the raffia sector will be largely due to the exports of woven sacks

Multi layered polypropylene bags can be a good substitute of pp bags in fertilizers and food grains sectors because of its low processing cost and high aesthetic values.

Thus on the while we can summarize the findings and say that the Raffia industry in India has been focusing on the traditional sacking application like cement in view of large volumes offered by these sectors. The industry should now formulate a strategy to capitalize on the opportunities and tap the potential in diversified markets both in sacking and non sacking applications. Many more applications in a variety of diversified markets exit globally and can be successfully transplanted to suit the Indian scenario. Such developments will not

only bring about better prospects of value addition for the raffia industry but also have a multiplier effect for the growth in end-use markets that this industry caters

Recommendations

• •

The availability of raw material should be made faster Focus should now shift on bringing various new diversified applications of Polypropylene raffia as Polyethylene is gaining strengthen in food grains and fertilizer sector.

The quality should be increased as exports are opening up which stress the need for having good quality products, which can be derived only from good quality raw material.

There is increasing amount of entries of foreign raw material providers to Raffia industry so Indian raw material manufacturers need to keep good check on their strategies.

Bibliography • • • • • • • • • • • • Plastic Woven sack News, its various issues. The Annual General Repot for the period 2008-2009 of RIL. Plastic Industry – January, February issues. Market Survey by Dr. I. Satya Sundaram. CRISIL Research 2007 – 2008. Cement Industry updates. National Journal –Petrochemicals. Notes collected from FAI about the Indian Fertilizer Industry. Plast India Reviews. Other sources of information were various Journals on Plastic Industry. Various research methodologies. Internet.

Annexure Questionnaires for the Raffia manufacture:1) Primary Market a) Local b) Regional c) National

2) What threats are you facing from current market? 3) How much is the approximate requirement of raw material a month? 4) Is raw material availability a problem? a) YES b) NO 5) Which (PP Raffia) grades do you purchase regularly? 6) Have you come across any new application of Raffia would you be adopting it? 7) Changing trends in market 8) Rate the raw material on a scale of 1 2 3 4 5 6 7 8 9 10 1: poor 10: the best 9) Do you see an increase in requirement of raw material in near future? a) YES b) NO 10 Future expansion plans a) Yes b) No c) Can’t say

11) Is the brand name of the company a criteria in purchasing raw material? 12) Do you have your own lamination plant? a) Yes b) No 13) Total installed capacity of the plant 14) Capacity being used for production 15) Production per hour 16) No. of looms a) Less than 10 b) 10-15 c) 15-20 d) 20-25 e) 25-30 f) 30-35

g) 35-40

h) Above 40

17) What factors determine your sales price? 18) What are the problems faced by industry? Questionnaires for End Users (Cement Industry) :1) What is the market size? 2) Primary Market a) Local b) Regional c) National d) International

3) Which locations according to you get maximum sales? a) Northern b) Western c) Eastern d) Southern 4) What are the problems faced by industry? What measures can be taken to overcome them 5) Future expansion plans a) Yes b) No c) Can’t say

6) Total annual production for Maharashtra (in million tones) a) Below 2 b) 2-3 c) 3-4 d) 4-5 e) above 5 7) What % of total production is packed generally? 8) Rank the below criteria on scale of importance while selecting packaging from 1 to 5 (1 being the best) a) Price b) grams/bag c) Strength d) Availability e) Quantity 9) Any other substitute to PWS better suited for packaging? 10) Do you see an increase in sales in near future? a) YES b) NO 11) Any particular monthly trend followed in sales? 12) How many vendors do you have for packaging material? a) Below 10 b) 10-15 c) 15-20 d) 20-25 13) On what basis are the vendors chosen? e) more

14) Does the distance of the manufacturer of plastic woven sacks from production unit matter? a) Yes b) No

15) Variety of cement requested and their percentages of the total production: No. Product 1 Product 2 Product 3 Name of Product Percentage

16) Cement shipping ways: Bulk cement % by rail Truck Bagged cement % by rail Truck Type and size of cement bag ____________________________ 17) Average requirement of bags a month? 18) Any particular changes in packaging in near future?

Questionnaires for End Users (Fertilizers Industry):1) What is the market size? 2) Which locations according to you get maximum sales? a) Northern b) Western c) Eastern d) Southern 3) Any particular preferences for packaging material? 4) Are PE bags preferred more than PP bags? a) Yes b) No 5) What are the reasons for using PE bags? 6) Rank the below criteria on scale of importance while selecting packaging from 1 to 5 (1 being the best) a) Price b) grams/bag c) Strength d) Availability e) Quantity 7) What are the problems faced by industry? What measures can be taken to overcome them? 8) Any future expansion plans? a) Yes b) No c) Can’t say 9) Do you see an increase in sales in near future? a) Yes b) No 10) Any particular monthly trend followed in sales? 11) Average requirement of bags a month? 12) Any particular changes in packaging in near future? End Users (Food grains Sector):-

The food grains provided by the farmer to the government can be quantified, but those provided to the increasing private sector is difficult to quantify. So the questionnaire won’t justify the exact figures. Brief information given by the FCI on the production of food grains has been included in the report.